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Every day, from demo days to pitch competitions, from LinkedIn messages to e-mail, I see hardworking founders making the same mistake. If you’re raising money today, chances are you’re doing it too.
A lot of what venture capitalists and angels are doing when they evaluate a startup is trying to find a trend. Is this company’s product catching on at warp speed, or languishing in a dusty corner of the market?
It’s the founder’s job to show us that trend. But all too often, pitches are long on ideas and short on numbers.
You must show rapid growth in revenue or, at the very least, unpaid users. But in most of the presentations I see, there is no such data at all.
Next, I ask the same question, over and over: “What is your revenue month by month for the last 3 months (3 numbers)?”
That’s when at least 80% of founders make the same mistake: giving me a single, aggregate number for the last 3 months. This does nothing to show investors a trend.
If you made $210,000 in the last 3 months, that could be $70,000 every month. Or it could be $40,000 in October, $60,000 in November, and $110,000 in December.
That’s the difference between 0 growth (appealing to almost no one) and 66% month over month growth (appealing to anyone sane).
If your growth is amazing, don’t hide it by offering up just 1 number or no numbers at all! And if it’s not, be honest about it and do your dardnest to improve it.
Investors will appreciate and remember your candor and your commitment to giving them the information they need.
I can’t emphasize this enough: without data showing a growth trend, it’s almost impossible to say whether I’d want to invest in a company or not. So guess where those pitches go?
Yep, next to the Old Navy ads and the e-mail from Svetlana seeking a husband.
There are simply too many startups doing things right for me to spend a lot of time on those that are doing it wrong, given that I am looking at 100+ pitches a month.
Arm yourself with this information and raise millions! 🙂
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Photo: “Head in Hands” by Alex E. Proimos is licensed under CC BY-NC 2.0
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